The energy price cap system is broken – call to end injustice for hundreds of thousands of UK consumers

  • Post author:

Ginger Energy has been in the news recently for bringing to the public’s attention the loopholes within the present energy price caps set by Ofgem.

Not all households are protected under the current policies, leaving many living within blocks of flats exposed to extortionate energy bills that will continue to rise.

We have written an open letter to Ofgem for the urgent review of their current polices:

“We are requesting an entire review of the price cap. It doesn’t include our residents; it doesn’t work for suppliers. The system is broken.” – Lisa Gregory, Director of Ginger Energy.

What is the energy price cap?

The current energy price cap was introduced in January 2019 by Ofgem as a way to protect households from the continued rise of energy prices. With wholesale prices at unprecedented levels, it is crucial to prevent households from being exposed to unnecessarily expensive tariffs.

The cap limits how much households can be charged and is set by Ofgem every April and October. Ofgem has recently increased the cap from £1,138 to £1,277 in October, and it is expected to continue to rise in 2022. The increased prices of gas are placing greater pressure on energy suppliers and households, but the caps do provide a certain level of protection for residents.

The loophole in the price cap

However, not every household is protected by these policies. Residents residing within blocks of flats that use a shared heating network are without protection as they are treated as commercial rather than domestic users.

Lisa Gregory, the Director of Ginger Energy, explains how: “We are about to have to tell the residents of some blocks that they will be paying four times the previous unit charge for their energy.”

“While normal residential consumers are protected – at least for a period – through the price cap, the consumers in these blocks are fully exposed to the market changes because they are classed as business users despite actually being domestic users.”

Hundreds of thousands of residents are being exposed to soaring energy bills due to this loophole, leaving many struggling to pay the cost of their bills with the looming possibility of debt.

How will this impact consumers?

Gregory makes it abundantly clear the negative impacts the lack of protection can have on consumers:

“In the current market commercial tariffs are up to 300% higher. How would your behaviour at home or business change if your electricity bill went up 300% overnight?”

“We read in the media about a potential 50% rise in the cap for consumers – these customers will be seeing their costs rise four-fold.”

“We bill almost 4,000 communal supply consumers. Our customers are typically young professionals living in city centre apartment blocks. On heat networks alone, nationally the latest figures reveal that around 17,000 heat networks supply nearly 500,000 consumers in the UK.”

Moving out of home is hard enough as it is with the rising mortgages and rental prices, but with the increased prices of energy bills, it is becoming close to impossible. The majority of people living within these apartment blocks are also usually those that are young or on lower incomes than those that are able to buy a house.

It is our responsibility to put protections in place to prevent these groups going into debt or preventing themselves from finding affordable, safe living situations.

You can find out more about the help you can get if you are struggling to pay your energy bills here.

What have heat networks got to do with it?

The UK Government has been promoting the use of low carbon technologies for heating due their commitment to be carbon net zero by 2050. To aid in reaching this goal, they have injected £320 million into heat networks between 2017 and 2021.

Despite these promises, they have not considered the possible downsides for consumers to take part in these schemes.

Through creating a communal energy supply, it places the owner of the building in control to agree energy contracts, rather than the residents. As a result, suppliers will only offer commercial tariffs despite the energy being used for residential purposes, preventing those consumers being protected by the energy price caps.

These residents are being left without protection, even though they are actively working towards the Government’s goal of using low carbon technologies.

Find out more about heat networks here.

What are Ginger Energy doing about it?

Ginger Energy is committed to bringing these issues to Ofgem. We are calling for the inclusion of residents who are involved in communal heat networks within the energy price caps.

As Gregory explains, “It’s our duty on behalf of our residents, to speak up about this.”

“Sadly, some residents don’t understand the gravity of what’s happening. It’s only when they receive the first bill they realise.”

We are unable to sit to the side and see the negative impact this will have not only on our customers, but also on families across the nation.

We have written an open letter to Ofgem calling for an urgent review of the current policies as well as creating a petition to close the energy cap loophole.

We urge you to take the ten seconds to sign the petition, and if you would like more information, please feel free to reach out to us at:

0345 307 3433